Vladislav Inozemtsev: The Foreign Agent in the Kremlin

lakhta wreck

The Foreign Agent in the Kremlin
Vladislav Inozemtsev
The Insider
December 31, 2019

One of the crucial events of the past year was passage of the law on labeling Russian nationals as “foreign agents.” Although the law emphasizes that such “agents” should disseminate information from foreign media outlets and receive financial remuneration from abroad, the notion of “foreign agent” has a quite definite meaning for most Russians: someone who works on behalf of a foreign government to the detriment of their own country.

However, if you think hard about the new law and its implementation (the Justice Ministry has been charged with designating individuals foreign agents, but citizens and NGOs will probably also be able to take the initiative), the first thing that comes to mind is the man who signed it so showily into law on December 2—Vladimir Putin, president of the Russian Federation, who took office exactly twenty years ago today, albeit as acting president.

When Putin moved into the Kremlin, Russia was successfully emerging from an economic crisis triggered by a sharp drop in oil prices in the late 1990s and the ruble crisis of 1998. These two events largely brought to a close the aftermath of the Soviet Union’s collapse and the transition from a planned economy to a market economy. Welcoming the new president, people believed him when he said, “The country’s future, the quality of the Russian economy in the twenty-first century, depends primarily on progress in those industries based on high technology and hi-tech products,” while the world took him at face value when he claimed, “Today we must declare once and for all that the Cold War is over. We abandon our stereotypes and ambitions, and henceforth we will jointly ensure the safety of the European population and the world as a whole.” It seemed that the coming decades should be extremely successful ones for Russia, and the country would inevitably takes its rightful place in the world economy and politics. However, events unfolded following a different scenario, and nearly all the trends that we can now ascertain as well-established suggest that if a CIA officer had taken charge of his country’s recently defeated enemy he would have done less damage to it than Putin has done.

First, Russia in the early noughties had very low labor costs: according to Rosstat, the average salary was $78 a month in 2000. Given that energy prices in Russia were then seven to ten times lower than in Europe, it was self-evident the country should decide to undertake large-scale industrialization by attracting foreign investors. The Central European countries, which in the late nineties and early noughties became successful industrial powers by attracting European capital (we can recall what happened with Škoda’s factories) were an example of the strategy’s wisdom.

However, despite what Russian authorities said at the time, preventing foreign capital from entering strategic industrial sectors became policy. Almost immediately after Putin came to power, the government began renationalizing assets that had been privatized in the nineties: instead of raising taxes on companies owned by Russian oligarchs, the regime commenced buying them out, constantly ratcheting up the price, culminating with Rosneft’s purchase of TNK-BP for $61 billion in 2013. In fact, taxes raised from the competitive sectors of the economy and redistributed through the budget went to buy assets in the extractive sector and were invested in rather dubious projects. Consequently, by the early teens, the share of raw materials (mineral products, ore, and metals) in Russian exports had reached 79–80%, as opposed to 50.4% of Soviet exports in 1989. Finally, in recent years, Russia has begun “diversifying” its raw materials exports by reaching out to China, effectively becoming an “energy appendage” not only of Europe but also of the whole world.

Second, as the economy became ever more dependent on extractive industries, Russia under Putin began to deindustrialize rapidly, resulting in a sharp decline in the demand for skilled workers, who could have been employed to develop the country on new foundations. According to various estimates, 16,000 to 30,000 industrial enterprises, which had employed over 13 million people in the late-Soviet period, were closed between 2000 and 2018. As of 2017, 9.9 million people were employed in Russian processing industries, as opposed to 21.7 million people in the RSFSR in 1989, although there was no significant increase in labor productivity. We can concede, of course, that a good many of these enterprises were not competitive, but most of them were never put up for auctions in which foreign investors were allowed to bid, the Russian government did not provide potential investors guarantees on investments in technically modernizing enterprises, and so on. Essentially, the government adopted a consistent policy of simplifying the industrial infrastructure, increasing dependency on imports, and most significantly, downgrading whole cities that had previously been important industrial centers. It would be no exaggeration to say that the bulk of Soviet industrial enterprises was destroyed not in the “accursed nineties,” but in the noughties and the early teens.

Third, the process went hand in glove with a demonstrative lack of attention to infrastructural problems and managing Russia’s vast expanses. About 700 airports were closed between 2000 and 2010, domestic passenger traffic dropped below international passenger traffic, and so many roads fell into disrepair and collapse that since 2012 city streets have been counted as roads in order to buff up the statistics. Infrastructure projects have been concentrated either in Moscow (e.g., the Moscow Ring Road, the Central Ring Road, expansion of the Moscow subway) or on the country’s borders as a kind of exercise in “flag waving” (e.g., Petersburg and environs, Sochi, Chechnya, the Crimean Bridge, the reconstruction of Vladivostok and Russky Island).

Consequently, rural settlements have begun dying out massively in most regions of the country: since 2000, around 30,000 villages in Russia have disappeared, and nearly 10,000 of them have eight or fewer residents. The number of residents in cities with populations ranging from 50,000 of 200,000 people has decreased: population reductions have been recorded in 70% of these cities, while the population has dropped by a quarter in more than 200 such cities. There has been a massive exodus of people from the Russian Far East.  Even the solution of longstanding problems that were handled for better or worse in the nineties has been abandoned, including disposing solid wastes, minimizing harmful emissions, and storing hazardous industrial waste. Russian infrastructure is close to collapse: depreciation of the power grids exceeds 70%, while 75% of the heating network is obsolete. Only 52.8% of local roads meet Russia’s poor standards. All attempts to remedy the situation are propaganda tricks more than anything, and yet budget funds for infrastructure are allocated regularly, just as taxes are collected from the populace.

Fourth, despite formal achievements, such as increasing life expectancy and reducing per capita alcohol consumption, the nation’s physical and mental health is verging on the disastrous. From 2000 to 2016, the number of HIV-infected Russians increased almost twelve times, reaching 1.06 million people, meaning that the threshold for an epidemic has been crossed. Spending on health care has remained extremely low. It is usually measured as a percentage of GDP, but a comparison of absolute figures is much more telling: in 2019, the government and insurance companies allocated only 23,200 rubles or €330 for every Russian, which was 14.2 times less than in Germany, and 29 times less than in the US, not counting out-of-pocket expenses.

Despite the huge influx of immigrants and migrant workers during Putin’s rule, the population of Russia (without Crimea) decreased by 2.7 million people from 2000 to 2019. Drug addiction has been spreading rapidly, becoming one of the leading causes of death among relatively young people in small towns. And yet the authorities see none of these things as a problem, limiting access to high-quality foreign medicines and accessible medical care (the number of hospitals has been halved since 2000, while the number of clinics has decreased by 40%), all the while believing the HIV crisis can be solved by promoting moral lifestyles. There is little doubt that Russia’s population should began dying off at a furious pace now that the reserves of economic growth have been exhausted.

Fifth, the formation of a bureaucratic oligarchy, able to appropriate at will what the authorities see less as “public property” and more as “budget flows,” has generated enormous corruption and blatantly inefficient public spending. A sizeable increase in spending on the space program—from 9.4 billion rubles in 2000 to 260 billion rubles in 2019—producced a drop in the number of successful launches from 34 to 22. Despite promises in 2006 to build almost 60 new nuclear power units, only 12 units have been brought online over the last twenty years. Programs for growing the military-industrial complex have not been consistently implemented: production of new weapons has been minuscule, amounting to only ten to twenty percent of Soviet-era production. The country’s only aircraft carrier has for the second time suffered combat-like damage during an “upgrade,” while its only 4.5-generation fighter has just crashed during a test flight.

The latest challenges posed to Russia by the development of information technology around the world have elicited no response whatsoever from the regime. On the contrary, the bureaucrats and siloviki have consistently acted to discourage researchers and innovators. The dominance of the siloviki in most government decision-making, their utter lack of oversight, and unprecedented incompetence have meant that much of the money that could be used effectively in the military sector and open up new frontiers for Russia has been simply been embezzled.

Sixth, Putin’s rule has been marked by the impressive “gifts” he has made to countries which the Kremlin has often identified as potential enemies. Around $780 billion was spirited from Russia between 2009 and 2019, whereas less than $120 billion was taken out of the country during the entirety of the nineties. The most important cause of this outflow was a law, passed in 2001, establishing a nine-percent tax on dividends paid to “foreign investors” or, rather, the offshore companies registered as owners of Russian assets. (The subsequent abolition of this measure in 2015 has changed little.) Much of this money was invested in passive sources of income in the west or spent on the luxurious lifestyles of Russian billionaires, thus supporting local economies in other countries.

Even more “generous,” however, was Putin’s gift to west in the form of the four million Russian citizens who have left Russia during his presidency: mainly young and middle-aged, well-educated, willing to take risks and engage in business, they now control assets outside the country that are comparable to the Russian Federation’s GDP. This wealth has been generated from scratch by talented people the Russian regime regarded as dead weight. The destruction of human capital is the biggest blow Putin has dealt to Russia, and it is no wonder western analysts argue Russia will need a hundred years at best to bridge the emerging gap.

Seventh, we cannot ignore the holy of holies: national security. We have already touched on the military sector in passing. It is a realm in which technological progress has largely boiled down to showing cartoons to members of the Russian Federal Assembly: space launches are still carried out using Soviet Proton rockets, designed in the sixties; the last of the Tu-22M strategic bombers rolled off the line in 1993; the Su-57 is based on groundwork done while designing the Su-47 during the late eighties;  and the advanced Angara (S-200) missile was developed as part of the Soviet Albatross program from 1987 to 1991. Things are no better in the secret services: agents sent on secret missions set off Geiger counters, like Lugovoy and Kovtun, blow their cover wherever they can, like Mishkin and Chepiga, or get caught in the act, as was the case with Krasikov.

The elementary inability to carry out their work in secret is the height of unprofessionalism: a handful of journalists can dig up nearly all the dirt on Russian agents, using information freely available on the internet. The same applies, among many other things, to the downing of Malaysia Airlines Flight 17 over the Donbass and the regime’s use of unprofessional, incompetent mercenaries from various private military companies.

Finally, eighth, President Putin’s foreign policy deserves special attention. Over the past ten years or so, the Kremlin’s own efforts have led to the creation of a buffer zone of neighboring countries that fear or hate Russia. If something like this could be expected from the Baltic states, which sought for decades to restore the independence they lost in 1940, no one could have imagined twenty years ago that Russia would make Georgia and Ukraine its worst enemies. However, our country’s principal “patriot”—whose daily bedtime reading seemingly consists of the works of Zbigniew Brzezinski, who once argued that Russia’s “imperial backbone” would be broken only when it lost Ukraine once and for all—has consistently sought to make Kiev recognize Moscow as its principal existential threat.

Similar sentiments have emerged in Minsk, where the authorities and populace of the country that suffered the greatest losses in the Great Patriotic War for the sake of the Soviet Union’s common victory have been nearly unanimous in their opposition to further rapprochement with Russia. We won’t even mention Russia’s damaged relations with the US and the EU: at the behest of Moscow, which is immeasurably weaker than the collective west, a new cold war has been launched that the Kremlin has no chance of winning but that could lead Russia to the same collapse suffered by the Soviet Union during the previous cold war. Meanwhile, Moscow’s hollow propaganda and its theatrical micro-militarism have been a genuine godsend to western military chiefs, who have been securing nearly unlimited defense budgets, just like the designers of advanced technology, who have been developing new weapons and gadgets in leaps and bounds.

I will not catalogue the current president’s other achievements—from destroying the Russian education system and nourishing a cult of power in society, thus generating a crisis of the family, to undermining Russian federalism and nurturing an unchecked power center in Chechnya. I will only emphasize once again that not just any foreign agent, after spending decades infiltrating the highest echelons of power in an enemy country, would be able to inflict such damage. I don’t consider Putin a foreign agent in the literal sense of the word, of course, but if it is now comme il faut in Russia to identify those who are working, allegedly, for hostile powers and thus inflicting damage on their own country, it is impossible to ignore what Putin has done over the past twenty years.

The current head of the Russian state should have a place of honor on the list of “foreign agents,” just as “Party card number one” was always reserved for Lenin in bygone days. And the west should be advised not to seek to undermine Putin’s regime but, on the contrary, do its utmost to extend his term in the Kremlin, simply because as long as Russia is so inefficient, backward, and profligate it poses no threat to the rest of the world, however much the strategists at the Pentagon try and convince the top brass otherwise.

Photo and translation by the Russian Reader

Vladislav Inozemtsev: Russia Has Stopped Making Sense

DSCN5158The west would do as well to try and engage these inebriated young Russians in meaningful dialogue as their erratic, spiteful government.

Vladislav Inozemtsev
Sanctions Forever
Snob
March 30, 2018

The recent simultaneous expulsion of 139 Russian diplomats from 24 countries is an extraordinary event, especially if you consider it was undertaken not in response to provocations against these countries themselves, but as a token of solidarity with Great Britain, which has accused Russia of attempting to murder the former intelligence agent Sergei Skripal on English soil with a chemical weapon.

The current fad is to describe what is happening as a new cold war. I noted long ago that Russia’s changed attitude to the world fit this definition well. However, events might have gone even farther or, to be more precise, in a different direction.

The west was extremely concerned about what happened in Ukraine in 2014–2015. Along with Putin’s speeches in Munich and Bucharest in 2007 and 2008, the five-day war in Georgia, Moscow’s attempts to strengthen its authority in the former Soviet Union and cultivate friendships with certain Central European leaders, Russia’s aggressive actions jibed well with previous views. The responses proposed seemed clear as well: containment, aid to allies, competition and rivalry on the global periphery. Putin was routinely described as someone who understood only zero-sum games. One side’s loss was always a win for the other side.

However, since the mid 2010s, the circumstances have changed dramatically, although it was hard to notice it immediately. Russia’s meddling in the US presidential election (no matter whether it impacted the outcome or not), its flirtation with European ultra-righwingers, its open support of war criminals like Assad, and the state terror unleashed against opponents of the regime and people whom Putin and his retinue have deemed “traitors” are all indications not only of the fact that the Kremlin has ceased to play by any rules whatsoever. More important, Moscow has seemingly ceased to take its own good into account when it makes certain moves.

What did the Kremlin gain by sullying the 2016 US presidential election? If we speak of Russia per se, nothing was gained whatsoever. Whoever had won the election without our meddling, the relations between our countries would certainly not be worse than they are now. The only consequences have been a supercharging of American politics and aggravation of internecine battles within the Washington establishment. What has Moscow gained by financing and supporting anti-European forces? Apparently, a similar destabilization. It is telltale that if this destabilization does become a reality, Russia will gain nothing from it. The EU will not crumble, but it will become less functional, and pro-European forces will only find it is easier to prove their argument that the countries of Europe must rally less for some particular purpose and more against a particular enemy. Even if pro-Putin forces achieve local victories here and there, it will not alter the overall picture. The greater part of Europe will become increasingly anti-Russian. What has Putin gained by murdering, apparently, over a dozen of his personal enemies in the UK, people who had long ago been stripped of any opportunity to harm Russia? He has turned our country into an international outcast, which no one wants.

The west’s reaction, as exemplified by the expulsion of Russian diplomats, points to a new reality, consisting primarily in the fact that Russia has finally stopped making sense to the world, nor should it surprise anyone. It really is unclear what Putin wants right now. Does he want to become dictator of his own country, wiping out even the semblance of democracy? The west would not prevent him from doing this in any way. Does he want to resurrect the Soviet Union? Go crazy, only it is far from a fact the khans and beys of Central Asia want the same thing, given that Moscow has so far not been terribly successful at achieving genuine integration with these countries. (Ukraine is a special case, but even here it would make more sense to negotiate with the Ukrainian people, not with Brussels and Washington.) Does he want to launder the money stolen in Russia in Europe and various offshore companies? I have not heard anything in the news about Russian funds and property being seized by foreign authorities. Since Russia has stopped making sense, the west has sent signals and hints Putin should settle down. They do not necessarily want him to become less anti-western, only more rational. They want him come down to earth and engage in lawlessness, if possible, only at home.

The Kremlin has feigned it cannot make sense of these signals. It prefers to act in keeping with the tactic of symmetrical response. However, what was normal during the real Cold War strikes observers as abnormal nowadays. In the 1970s, members of the Central Committee did not own villas in the south of France and did not stash their money in banks registered in Luxembourg and Delaware. Soviet enterprises were not owned by companies up to their necks in debt in the west. By hook or by crook, Soviet home industry supplied the populace with nearly all the bare necessities, and what it could not supply was obtained from the Soviet Union’s Eastern European satellities. Everything has changed since then. Russia is much more vulnerable to European economic sanctions than US nuclear missiles.

Symmetrical responses were productive when the parties were motivated by clearly defined interests. When one side is motivated by garden-variety resentment, such responses are counterproductive. Moscow assumes its bluff has been called, although the west’s signal contains a different message: there is nothing to discuss with the Kremlin. Moreover, the process no longer seems like fun to anyone. Given the circumstances, what is the point of having embassies in hostile countries that outnumber the diplomatic missions of their most trusted friends?

As for the parallels that suggest themselves when we contemplate the Kremlin’s latest steps, they do not resemble the actions of Khrushchev and Brezhnev. They are more reminiscent of the Stalin era’s experiments. The Soviet secret services eliminated the revolution’s enemies abroad, while the Kremlin categorically demanded the German communists not form a coalition with the Social Democrats in the face of the Nazi threat.  The Kremlin imagined maximum destablization of the democratic countries would cause them to collapse and help establish the universal reign of the proletariat. History, however, proved this policy was erroneous. No one suffered more from the collapse of the Weimar Republic than the Soviet Union. If European integration fails, Russia is not likely to benefit, either. Were we not thrilled about the Brexit vote not so long ago? Did we not believe a more independent Great Britain would deal a blow to the Eurocrats? The only problem is that for now it is rather more obvious the UK’s increased independence has strengthened its resolve to deal with Moscow, while Europe (and not only Europe) has been inclined to support the supposed renegade.

Summing up, I can only repeat my longstanding assumption that the sanctions against Russia are virtually permanent. Instead of contemplating events in a rational manner, weighing the pros and cons, and taking decisions aimed at reducing tension, Russia has continued to engage in provocations, lies, and dodges. (In Soviet times, the Party’s leaders had the good sense to maintain dialogue with the west on economic and other issues even at the height of the arms race.) The west finds it difficult to respond with force, nor does anyone want to respond with force, so the tokens of growing contempt will keep manifesting themselves over and over again. Russia should be ready for this. Or it should begin to change, although, apparently, it is pointless to expect this.

Thanks to Alexander Morozov for the heads-up. Translation and photo by the Russian Reader